Launching new products and making massive upgrades to existing products is a dangerous thing for an automaker to do. However Nio navigates well from that situation.

(Image credit: Nio)

Nio (NYSE: NIO, HKG: 9866, SGX: Nio) today officially unveiled its new SUV, the ES7, which, as its management team previously said, is aimed at competing with the BMW X5L.

But the model itself and the narrative about it seem less important than the fact that with today's launch Nio has managed to solve a dilemma that its major local counterparts have previously failed to address.

That dilemma is how an automaker can avoid an image crisis in the process of upgrading its products while pleasing potential customers and avoiding angering existing owners.

Obviously, Nio has done it.

For Nio, today's launch event was not only its first online product launch, but also marked the biggest product update in its history.

During the short 45-minute event, Nio unveiled plans for hardware upgrades to existing models, annual facelifts for existing SUVs, and the ES7, its first SUV based on the NT 2.0 platform.

To understand Nio's cleverness, we can start by looking at the dilemma that its two major local peers, Xpeng Motors (NYSE: XPEV, HKG: 9868) and Li Auto (NASDAQ: LI, HKG: 2015), have previously faced when updating their products.

In July 2019, Xpeng announced the 2020 G3 SUV, less than a year after the model's initial launch.

Xpeng not only increased the G3's range by more than 100 km at that time, but also lowered the price by more than RMB 10,000.

The move certainly made potential customers happy, but not so for those who bought the 2019 Xpeng G3.

Xpeng was subsequently hit with a flood of complaints, leading to a crisis in its brand image. The company later offered compensation packages to quell the crisis, and its chairman and CEO, He Xiaopeng, was forced to apologize, saying, "I'm sorry for making everyone sad."

A similar situation happened to Li Auto last year.

Li Auto announced the new Li ONE at the end of May 2021, and although the price was increased by RMB 10,000 compared to the previous model, it offered a lot of upgrades, especially the self-driving chip and range.

After the announcement of the new Li ONE, Li Auto also encountered a large number of complaints from customers who purchased the car shortly before the launch of the facelift, claiming that the company failed to reveal information about the facelift at the Shanghai auto show at the end of April and was suspected of fraud.

Such complaints were reported in the media for a couple of months after the new Li ONE was announced, exposing the company to the same image crisis that Xpeng had previously experienced, although the complaints have since faded away.

Nio today announced the new SUV ES7, with starting prices of RMB 468,000 and 548,000 including batteries. The model is available for pre-order now, and deliveries are expected to begin at the end of August.

The company also announced an annual facelift of the existing SUV models with a more powerful in-vehicle intelligence system, Alder.

The starting price for the 2022 ES8 is RMB 496,000, which is RMB 18,000 higher than the previous RMB 478,000.

The starting price of the 2022 ES6 is RMB 386,000, up RMB 18,000 from RMB 368,000.

The starting price for the 2022 EC6 is RMB 396,000, RMB 18,000 higher than the previous price of RMB 378,000.

Consumers who choose to purchase a car under Nio's BaaS battery rental program will be able to reduce the price by at least RMB 70,000.

These 2022 models will be available for pre-order this month, with deliveries starting in August.

For Nio, if it takes a similar approach to Xpeng and Li Auto for the ES7 and the 2022 ES8, ES6 and EC6, the scenario would look like this.

Consumers who have purchased Nio's SUVs in recent months will soon see their vehicles become obsolete and a flood of complaints will arrive.

For those who can afford Nio vehicles priced at an average of over RMB 400,000, they would surely prefer to pay an extra RMB 18,000 to get the latest product rather than see the model they just purchased become obsolete.

The smart thing about Nio is that it seems to have started preparing for today's launch event from a year ago. Remember when CnEVPost reported in late June last year that the company was evaluating hardware upgrades including 5G support for existing models?

In fact, Nio's preparation for the upgrade of its existing models began a year ago, and many meetings were held with users during the process.

While the ES7 is certainly exciting in light of today's launch event, Nio's proposed hardware upgrade plan is the key that will allow it to avoid experiencing image problems.

Nio unveiled the Alder intelligent system based on Qualcomm 8155 chip at today's event, including in-vehicle intelligent hardware, computing platform, operating system, algorithms and applications.

Every existing ES8, ES6 and EC6 user can pay to have their vehicles upgraded with Alder for RMB 9,600. With the additional option of a 5G high-performance central gateway, the price is RMB 12,600.

The cost of these upgrades is less than the price increase for the 2022 model year relative to the current model year and will keep existing customers happy as well.

This means that if customers who have purchased Nio models in recent months wish to use the latest hardware, they will be able to get them at a lower cost.

This is crucial for a company like Nio, which bills itself as a "user enterprise," and angering existing owners would shake one of the key foundations of its business model.

It's hard for a normal person to make everyone happy, and this is especially true for a company.

However, Nio has basically managed to make the majority of its users happy, which is the killer skill that has allowed it to maintain a very high level of user loyalty.

Although Nio's way is constantly being imitated, no other Chinese company has been able to do what it has done so far.